Clipper Realty Inc. Announces First Quarter 2017 Results

- Completes Acquisition of 107 Columbia Heights for $87.5 Million -

May 15, 2017 04:05 PM Eastern Daylight Time

NEW YORK--(BUSINESS WIRE)--Clipper Realty Inc. (NYSE:CLPR), an owner and operator of multifamily
residential and commercial properties in the New York metropolitan area,
today announced financial and operating results for the three months
ended March 31, 2017.

Highlights - First Quarter 2017

Revenues grew approximately 16% to $25.3 million for the first quarter
2017 as compared to the same period of 2016

Net loss was reduced by 60% to $1.3 million or $0.03 per share as
compared to the same period of 2016

Adjusted Funds from Operations (“AFFO”) increased by 122% to $4.0
million or $0.10 per share as compared to the same period of 2016

Completed initial public offering in February and March 2017, raising
gross proceeds of $86.3 million

New lease with City of New York at the 250 Livingston Street property
took effect January 2017, increasing revenue by $2.6 million annually

Declares dividend of $0.095 for the first quarter of 2017 representing
46% growth over same period of 2016 and 11% growth over last dividend

Completed acquisition in May 2017 of 107 Columbia Heights in Brooklyn
Heights for $87.5 million

Management Commentary

David Bistricer, Co-Chairman and Chief Executive Officer, said, “We are
pleased with the strong rent growth we achieved across our portfolio in
the first quarter and expect that the recent acquisition and planned
repositioning of 107 Columbia Heights will further drive growth and
create incremental value within our portfolio. We continue to experience
excellent demand for our residential properties in Brooklyn and
Manhattan, two of the highest barrier to entry multifamily markets in
the country. Given our strong liquidity with funds raised in our
recently completed IPO and years of experience and deep relationships in
the New York City real estate industry, we believe we are well
positioned to create attractive long term total shareholder returns.”

Financial Results

Revenues grew by $3.6 million to $25.3 million for the first quarter
2017, or approximately 16% as compared to $21.7 million for the first
quarter 2016. The increase in revenues during the quarter ended March
31, 2017 was attributable to the renewed lease at the 250 Livingston
property for approximately one-third of the building, increases in
residential rent per square foot at the Company’s Flatbush Gardens and
Tribeca House properties and acquisition of the Aspen property in June
2016.

Net loss for the quarter ended March 31, 2017 was $1.3 million, or $0.03
per share, as compared to $3.2 million or $0.09 per share in 2016,
representing an improvement of approximately 60%. The reduction in net
loss was due to higher revenue, reduced interest expense (primarily
amortization of loan costs, due to the refinancing of the 141 Livingston
Street property in May 2016 and the Tribeca House property in December
2016) partially offset by property tax increases, primarily at the
Tribeca House and Flatbush Gardens properties.

AFFO for the quarter ended March 31, 2017 was $4.0 million, or $0.10 per
share, as compared to $1.8 million, or $0.05 per share, in 2016. This
increase of 122%% reflects the above-mentioned increases in revenue,
partially offset by increases in property operating expenses and real
estate taxes. AFFO is a non-GAAP measure. See “Reconciliation of
Non-GAAP Measures.”

Balance Sheet

Total debt was $754.8 million at March 31, 2017 as compared to $754.5
million at December 31, 2016. At March 31, 2017, 46% of the Company’s
debt was fixed rate, the average maturity was 5.0 years and the average
rate was 4.3%. Variable rate debt is subject to an interest rate cap of
2% LIBOR.

In February and March 2017, the Company completed an initial public
offering in which it sold approximately 6.4 million shares at $13.50 per
share, raising approximately $86.3 million gross proceeds.

Acquisitions

In May 2017, the Company completed the purchase of a residential
property located at 107 Columbia Heights in Brooklyn for $87.5 million
or $596 per square foot. The property comprises approximately 154,000
square feet, in 159 residential units. In connection with the
acquisition, the Company obtained a new $59.0 million mortgage loan,
secured by the property, bearing interest of 3.85% over LIBOR, and
maturing in August 2020. The loan allows for additional borrowings of up
to $14.3 million for capital improvements.

Capital Expenditures

The Company has been engaged in a capital program to reposition several
of its properties and achieve optimal rent growth. The Company spent
$3.1 million on major renovation projects in the first quarter of 2017
as compared to $3.4 million in 2016. At the Tribeca House property, the
expenditures were to upgrade units and common areas, including the
lobby. At the Flatbush Gardens property, comprising 59 buildings and
nearly 22 acres, the expenditures were to replace a major terrace area,
install security cameras and lighting and refurbish all the basement
areas. At the 141 Livingston Street property leased to New York City,
the expenditures were to refurbish elements of the property as agreed
under the lease that renewed in 2014.

Dividend

The Company today declared its first quarter dividend of $0.095 per
share to shareholders of record on May 25, 2017 payable June 2, 2017.
This represents an increase of 46% from the dividend paid last year for
this quarter and an 11% increase from the dividend paid for last quarter.

Conference Call and Supplemental Material

The Company will host a conference call on May 15, 2017 at 5:00 PM
Eastern Time to discuss further first quarter 2017 results. The
conference call dial-in number is 888-267-2845 or 1-973-413-6102,
conference entry code 789252. A replay of the call will be available
from May 15, 2017 following the call through May 29, 2017 by dialing
800-332-6854 or 1-973-528-0005, replay conference ID 789252.
Supplemental data to this release can be found under the “Presentations”
navigation tab on the “Investors” page of our website at www.clipperrealty.com.
The Company’s filings with the Securities and Exchange Commission
(“SEC”) will be filed at www.sec.gov
under Clipper Realty Inc.

About Clipper Realty

Clipper Realty Inc. (NYSE: CLPR) is a self-administered and self-managed
real estate company that acquires, owns, manages, operates and
repositions multifamily residential and commercial properties in the New
York metropolitan area, with an initial portfolio in Manhattan and
Brooklyn. For more information on Clipper Realty Inc., please visit www.clipperrealty.com.

Forward Looking Statements

Various statements contained in this press release, including those that
express a belief, expectation or intention, as well as those that are
not statements of historical fact, are forward looking statements. These
forward-looking statements may include estimates concerning the timing
of certain acquisitions, the amount of capital projects, and the success
of specific properties. Our forward-looking statements are generally
accompanied by words such as "estimate," "project," "predict,"
"believe," "expect," "intend," "anticipate," "potential," "plan" or
other words that convey the uncertainty of future events or outcomes.
The forward-looking statements in this press release speak only as of
the date of this press release.

We disclaim any obligation to update these statements unless required by
law, and we caution you not to rely on them unduly. We have based these
forward-looking statements on our current expectations and assumptions
about future events. While our management considers these expectations
and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict
and many of which are beyond our control and which may cause our actual
results, performance or achievements to differ materially from any
future results, performance or achievements expressed or implied by
these forward-looking statements. For a discussion of these and other
important factors that could affect our actual results, please refer to
our filings with the Securities and Exchange Commission, including the
"Risk Factors" section of our Annual Report on Form 10-K for the year
ended December 31, 2016.

Adjustments to reconcile net loss income to net cashprovided
by operating activities:

Depreciation

3,705

3,073

Amortization of deferred financing costs and other assets

721

1,508

Amortization of lease intangibles and other assets

635

555

Amortization of below market leases

(434

)

(430

)

Deferred rent receivable

77

3

Stock-based compensation

595

510

Change in fair value of interest rate caps

137

9

Changes in operating assets and liabilities:

-

-

Restricted cash

(5,434

)

(4,731

)

Tenant and other receivables

(869

)

(321

)

Related party receivable

-

-

Prepaid expenses, other assets and deferred costs

4,305

3,985

Accounts payable and accrued liabilities

(1,485

)

(48

)

Related party payables

-

-

Security deposits

132

78

Other liabilities

364

5

Net cash provided by operating activities

1,151

990

CASH FLOW FROM INVESTING ACTIVITIES

Additions to land, buildings, and improvements

(3,102

)

(3,358

)

Cash paid in connection with acquisition of real estate

(8,860

)

(5,000

)

Net cash used in investing activities

(11,962

)

(8,358

)

CASH FLOW FROM FINANCING ACTIVITIES

Proceeds and costs from sale of common stock

78,855

-

Proceeds from sale of preferred stock

-

117

Payments of mortgage notes payables

(245

)

(176

)

Dividends and distributions

-

(2,480

)

Loan costs and other

(135

)

(49

)

Net cash provided financing activities

78,475

(2,588

)

Net increase in cash and cash equivalents

67,664

(9,955

)

Cash and cash equivalents - beginning of period

37,547

125,332

Cash and cash equivalents- end of period

$

105,211

$

115,377

Supplemental cash flow information

Cash paid for interest

$

8,441

$

7,934

Clipper Realty Inc. and Predecessor

Reconciliation of Non-GAAP Measures

(In thousands except per share data)

(unaudited)

Funds from Operations (“FFO”) is defined by the National Association of
Real Estate Investment Trusts (“NAREIT”) as net loss (computed in
accordance with GAAP), excluding gains (losses) from sales of property
(and impairment adjustments), plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships and
joint ventures. Our calculation of FFO is consistent with FFO as defined
by NAREIT.

AFFO is defined by us as FFO excluding amortization of identifiable
intangibles incurred in property acquisitions, straight line rent
adjustments to revenue from long-term leases and amortization of costs
incurred in originating debt. Historical cost accounting for real estate
assets implicitly assumes that the value of real estate assets
diminishes predictably over time. In fact, real estate values have
historically risen or fallen with market conditions. FFO is intended to
be a standard supplemental measure of operating performance that
excludes historical cost depreciation and valuation adjustments from net
income. We consider FFO to be useful in evaluating potential property
acquisitions and measuring operating performance. We further consider
AFFO to be useful in determining funds available for payment of
distributions.

FFO and AFFO do not represent net income or cash flows from operations
as defined by GAAP. You should not consider FFO and AFFO to be
alternatives to net income as a reliable measure of our operating
performance; nor should you consider FFO and AFFO to be alternatives to
cash flows from operating, investing or financing activities (as defined
by GAAP) as measures of liquidity.

The following table sets forth a reconciliation of FFO and AFFO for the
periods presented to net loss before allocation to non controlling
interests, as computed in accordance with GAAP (amounts in thousands):

Three Months EndedMarch 31,

2017

2016

FFO

Net loss

$

(1,298

)

$

(3,206

)

Real estate depreciation and amortization

3,935

3,290

$

2,637

$

84

AFFO:

Amortization of below-market lease reserve

(434

)

(430

)

Amortization of straight-line rent reserve

77

3

Amortization of debt costs

721

1,508

Caps MTM

137

9

Amortization of RE tax abatements

392

338

Non-cash stock-based compensation

595

510

Acquisition costs

21

6

Maintenance capex (a)

(136

)

(219

)

Total AFFO

$

4,010

$

1,809

AFFO Per Share/Unit

$

0.10

$

0.05

We believe that Adjusted EBITDA is a useful measure of our operating
performance. We define Adjusted EBITDA as net (loss) income before
allocation to non-controlling interests plus real estate depreciation
and amortization, amortization of identifiable intangibles, interest
expense, net, acquisition costs and stock based compensation. Other
REITs may use different methodologies for calculating Adjusted EBITDA,
and accordingly, our Adjusted EBITDA may not be comparable to other
REITs. We believe that this measure provides an operating perspective
not immediately apparent from GAAP operating income or net income. We
use Adjusted EBITDA to evaluate our performance because Adjusted EBITDA
allows us to evaluate the operating performance of our company by
measuring the core operations of property performance and administrative
expenses available for debt service and capturing trends in rental
housing and property operating expenses. However, Adjusted EBITDA should
only be used as an alternative measure of our financial performance.

The following table reconciles Adjusted EBITDA to net (loss) income
before allocation to non-controlling interests (amounts in thousands):

Three Months EndedMarch 31,

2017

2016

Adjusted EBITDA

Net Loss

$

(1,298

)

$

(3,205

)

Depreciation and amortization

3,935

3,290

Amortization of below-market lease reserve

(434

)

(430

)

Amortization of straight-line rent reserve

77

3

Amortization of RE tax abatements

392

338

Non-cash stock-based compensation

595

510

Acquisition costs

21

6

Interest expense

8,652

9,211

Adjusted EBITDA

$

11,940

$

9,722

Adjusted EBITDA Per Share/Unit

$

0.29

$

0.26

We believe that Net Operating Income (“NOI”) is a useful measure of our
operating performance. We define Net Operating Income as income from
operations plus real estate depreciation and amortization, acquisition
costs, general and administrative costs and amortization of identifiable
intangibles. Other REITs may use different methodologies for calculating
NOI, and accordingly, our NOI may not be comparable to other REITs. We
believe that this measure is widely recognized and provides an operating
perspective not immediately apparent from GAAP operating income or net
income. We use NOI to evaluate our performance because NOI allows us to
evaluate the operating performance of our company by measuring the core
operations of property performance and capturing trends in rental
housing and property operating expenses. NOI is also a widely used in
valuation of properties. However, NOI should only be used as an
alternative measure of our financial performance.

The following table reconciles NOI to income from operations (amounts in
thousands):